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South Asia Investor Review is focused on reporting, analyzing and discussing the economy and the financial markets of countries in South Asia, including Pakistan, Bangladesh and Sri Lanka. For investors looking to invest in emerging markets beyond BRIC countries (Brazil, Russia, India and China), this blog is designed to help international investors looking to learn about investing in South Asia with focus on Pakistan. Riaz has another blog called Haq's Musings at http://www.riazhaq.com

Economic Impact of Mumbai Attacks

Hong Kong-based Political & Economic Risk Consultancy Ltd. has recently rated India as the riskiest of 14 Asian countries, not including Pakistan and Afghanistan, it analyzed for 2009. The Mumbai attacks are likely to worsen India's risk rating, especially if the attacks lead to hostilities with Pakistan and anti-Muslim riots in India. By targeting foreigners and the nation's commercial capital, the terrorists have struck at international links that have supported 9 percent average growth in the $1.3 trillion Indian economy for the past three years. The Mumbai events "couldn't happen at a worse time," Patrick Bennett, a strategist with Société Générale in Hong Kong, told the Wall Street Journal.

With the economic growth already slowing to a multi-year low rate of 7% and the national elections approaching in first half of 2009, these attacks have come at a particularly awkward time for the ruling Congress party. The opposition BJP's leader L.K. Advani has criticized the government's handling of terrorism as “non-serious approach”, according to the Press Trust of India. In response, Prime Minister Manmohan Singh has replaced his home minister and vowed to get tough on a "neighboring country", an apparent reference to Pakistan.

Foreign investors have already pulled $13.5 billion out of the India's stock market so far this year, driving the benchmark Sensex index down 57% and hurting the rupee. Liquidity has dried up, economic growth is slowing and consumers and businesses are spending less money, according to Bloomberg.India faces a prolonged downturn that is already forcing companies to cut jobs. Its economy grew 7.6% in the July-September quarter, the slowest pace in almost four years, and down from a 9.3% expansion a year earlier, according to Wall Street Journal.

"There may not be some big countercyclical fiscal stimulus to address a cyclical downturn, but it could be more of a piecemeal approach," says Ramya Suryanarayan, economist at DBS bank in Singapore. The fiscal deficit is running "at between 7% and 8% of gross domestic product, and further expansionary policies will add to the stress."

Given the angry and vengeful public mood in India, it is likely that the hardliners will prevail, forcing significant policy changes that will affect the entire region for a long time to come. For beginners, the warlike Indian posture toward Pakistan will scare investors and tourists away from India. With the emboldened Hindu fundamentalist outfits gaining support, a more serious threat to the Indian economy could come from a repeat of Gujarat 2002 across the entire country. If India decides to "punish" Pakistan by invading it, it will be devastating for both India and Pakistan and set them back by decades as the business and consumer confidence plummets. The BPO and IT businesses will go to more stable regions of the world. Already, the gap between the Chinese and the Indian economies seems to be growing. China's stability under one-party government is more effective in sustaining high growth, Indian Finance Minister Chidambaram said in April of this year, adding "the distance between India and China is in fact increasing, not reducing because China's growth rate is faster." Sustained gap in economic growth between India and China could make India's economy more like Taiwan's in comparison with China's, in spite of India's big population.

India's image as a peaceful and stable nation has helped it build confidence of foreign investors and businesses to set up shops in India and fuel its economic growth. For example, Americans alone brought $13 billion in foreign direct investments in 2007 from large investors and Fortune 500 corporations to India, which helped create jobs and sustain the virtuous cycle of intellectual and economic development. If the actions of Indian politicians shatter this image of peace and stability, it will be very difficult to rebuild it.

Based on a quick review of India's current status and great potential, including its strengths and weaknesses, I strongly believe India can stay on the road to greatness it deserves with its rich heritage as one of the oldest civilizations on earth and the world's largest modern democracy. India's toughest challenge in the 21st century will continue to be in how well it negotiates the obstacles and potholes created by internal strife from growing religious and ethnic fanaticism, homegrown and international terrorism, ongoing regional insurgencies, and increasing economic disparities.

Comments

Even before Mumbai attacks and the Satyam scandal and despite the 55% drop in India's benchmark Sensex in 2008, relative valuations were high. The market's PE ratio, based on expected earnings for the next 12 months, is 60% higher than emerging markets as a group and 72% higher according to its price-to-book ratio. The roughly 2% yield on the Sensex is minuscule compared to regional markets offering upwards of 5%.

India's market cap overtook its GDP in May 2007. By January 2008, it had reached 180% of GDP, extraordinarily high compared to 131% for the U.S. during the dot-com bubble and 150% for Japan at its market peak. In July, the market-cap ratio dropped below 100%. What it means is that even if the Indian economy continues to do well over the next two decades, GDP would have to more than double for the market cap to return to its previous heights without an equities bubble. If the economy keeps growing at 7.2%, that doubling would take at least ten years.

Hong Kong-based Political & Economic Risk Consultancy Ltd. has recently rated India as the riskiest of 14 Asian countries, not including Pakistan and Afghanistan, it analyzed for 2009. Satyam scandal is likely to add additional risk if the Indian authorities and corporate sector fail to take measures to restore investor confidence in India's publicly traded companies.

Who really committed #MumbaiTerrorAttack 2008? #LeT? #Indian agencies? #Pakistan agencies? Will we ever know the truth? Is it a betrayal of #India? http://www.countercurrents.org/2017/06/08/the-betrayal-of-india-a-close-look-at-the-2008-mumbai-terror-attacks/

Elias Davidsson

Incompetence is a fact of life, but there are times when the incompetence theory is strained to the breaking point and it is more rational to posit deliberate deception. In the case of the Mumbai investigation, Davidsson depicts its failures as going well beyond incompetence.

Neither the police, nor the judge charged with trying the sole surviving suspect, made public a timeline of events (188-189; 688-689). Even the most basic facts of when a given set of attacks began and when they ended were left vague.Key witnesses were not called to testify. Witnesses who said they saw the terrorists commit violence, or spoke to them, or were in the same room with them, were ignored by the court (e.g., 279 ff.).Contradictions and miracles were not sorted out. One victim was apparently resurrected from the dead when his testimony was essential to the blaming of Pakistan (229-230). A second victim died in two different places (692), while a third died in three places (466). No one in authority cared enough to solve these difficulties.Eyewitnesses to the crime differed on the clothing and skin color of the terrorists, and on how many of them there were (328-331). No resolution was sought.At least one eyewitness confessed she found it hard to distinguish “friends” from terrorists (316). No probe was stimulated by this odd confusion.The number of terrorists who committed the deeds changed repeatedly, as did the number of terrorists who survived (29 ff.; 689).Crime scenes were violated, with bodies hauled off before they could be examined (682-683).Identity parades (“line-ups”) were rendered invalid by weeks of prior exposure of the witnesses to pictures of the suspect in newspapers (101; 582).Claims that the terrorists were armed with AK-47s were common, yet forensic study of the attack at the Cama Hospital failed to turn up a single AK-47 bullet (156).Of the “hundreds of witnesses processed by the court” in relation to the attacks at the CaféLeopold, Taj Mahal Palace Hotel, Oberoi-Trident Hotel or Nariman House, “not a single one testified to having observed any of the eight accused kill anyone” (40).Indian authorities declined to order autopsies on the dead at the targeted Jewish center in Nariman House. The dead, five out of six of whom were Israeli citizens (427), were instead whisked back to Israel by a Jewish organization based in Israel, allegedly for religious reasons (453). Religious sensitivity seems to have extended to a large safe at the crime scene, which the team also transported to Israel (454).(3) Extreme secrecy and the withholding of basic information from the population, with the excuse of “national security”

The surviving alleged terrorist had no public trial (661).No transcript of his secret trial has been released (670).One lawyer who agreed to defend the accused was removed by the court and another was assassinated (670).The public was told there was extensive CCTV footage of the attacks, despite the mysterious malfunctioning of the majority of CCTV cameras on the days in question (97-98; 109 ff.; 683 ff.); but only a very small percentage of the claimed footage was ever released and it suffers from serious defects–two conflicting time-stamps and signs of editing (111).Members of an elite Indian commando unit that showed up with between 475 and 800 members to battle eight terrorists (534) were not allowed to testify in court (327; 428-429).The “confession” of the suspect, on which the judge leaned heavily, was given in secret. No transcript of this confession has been released to the public and the suspect later renounced the confession, saying he had been under threat from police when he gave it (599 ff.; 681).....

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I am the Founder and President of PakAlumni Worldwide, a global social network for Pakistanis, South Asians and their friends. I also served as Chairman of the NEDians Convention 2007. In addition to being a South Asia watcher, an investor, business consultant and avid follower of the world financial markets, I have more than 25 years experience in the hi-tech industry. I have been on the faculties of Rutgers University and NED Engineering University and cofounded two high-tech startups, Cautella, Inc. and DynArray Corp and managed multi-million dollar P&Ls. I am a pioneer of the PC and mobile businesses and I have held senior management positions in hardware and software development of Intel’s microprocessor product line from 8086 to Pentium processors. My experience includes senior roles in marketing, engineering and business management. I was recognized as “Person of the Year” by PC Magazine for my contribution to 80386 program. I have an MS degree in Electrical engineering from the New Jersey Institute of Technology.
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